'What,' asked the teaser trailers, posters and website headlines four years ago, 'is the matrix?' The puzzled tone was disarmingly honest. The Matrix was a film of a crankily eclectic kind: a merger of cybernetics and kung fu, set in a world where robots engage in aerial fisticuffs with a few remaining members of the human race. No one had ever heard of the two obsessive brothers, Larry and Andy Wachowski, who wrote and directed it. Nevertheless, their nutty invention totted up $171 million in the United States alone, became the first DVD to sell a million copies, and generated lucrative video games.

Two cinematic sequels are to be released this year, and a Newsweek journalist, over-oxygenated after a brief preview, has pronounced them '2003's hottest flicks'. Today, The Matrix is a universally recognisable, globally franchised brand. But do we really know what the matrix itself is?

The answer lies in the word itself, which splits into a pun. There are two matrices in the film. A matrix, first of all, is a womb. The Wachowskis conjure up a future in which the planet is a parched, ravaged desert. Machines have assumed control, enslaving men and reducing them to a food source. Human beings doze in uterine vats of goo while a master race of artificially intelligent robots sucks life-giving heat from them. To keep their victims occupied while they feed on this vital warmth, they wire them to a main-frame of dreams, a cerebral cinema, whose illusory delights are known as 'the matrix'.

But there is another kind of matrix, less physical than the womb, a mathematical grid, with numbers arranged in rows and columns. The film begins by studying such a galaxy of digits, glimmering on a computer screen. The camera closes in on a zero and travels through its welcoming vacancy. The numerical matrix, like the maternal pods in which we see human beings drowsing while the machines graze on them, is a means of multiplying and reproducing. At the start of the film, we stare at the gaping O; we soon encounter the complementary 1 in the slim, upright personage of Keanu Reeves, a hacker who lives in Room 101 of an apartment block. His alias, during his nocturnal bouts of electronic mischief, is Neo, which turns to be an ana gram. 'You are the One, Neo,' remarks the guerrilla leader, Morpheus (played by Laurence Fishburne).

Morpheus means that Neo is the Messiah, a Christ for the cybernetic age. This saviour has been born, somehow or other, from an immaculate union between Morpheus, who represents God the Father, and a nurturing mother called Trinity, an unholy spirit in PVC bondage gear, played by Carrie-Anne Moss. The One has a mission, which is to demolish the matrix. We are all, Morpheus tells him, slumbering inside 'a computer-generated dream world'.

The matrix fills us with intoxicating illusions through wires and electrodes, and this 'neural, interactive simulation' persuades us that we are alive; in fact, our existence is merely virtual, a brightly coloured fantasy of sex and shopping. 'We're inside a computer programme?' asks Neo when Morpheus gives him this desolating information: Keanu Reeves, as a bosomy oracle remarks, is cute but not too bright.

Anyone baffled by this heady blend of theology and electronics should not panic. The idea, projected into the future by the Wachowskis, is very old. The matrix is another name for Plato's cave, where men huddle in the half-light and turn their backs on the scorching, truthful sun. More recently, the notion was paraphrased by Albert Camus, who argued that our supposed reality is nothing more than crude, painted scenery on a flimsy stage.

The film's story is equally familiar. Neo, following a woman with a white rabbit tattooed on her shoulder, goes on the same journey as Lewis Carroll's Alice, who discovers a land of mad wonderment on the other side of a looking-glass. Morpheus invites his protégé to discover 'how deep the rabbit hole really is'.

The nerdy acolytes and besotted cultists who chat about The Matrix in cyberspace believe they are dealing with something dizzily profound. For them, the film resembles the grand unified theory that astrophysicists are straining to propound. On the internet, you can find learned essays by doctoral geeks who explicate the metaphysics of The Matrix, analyse its indebtedness to the phenomenology of Husserl and Merleau-Ponty, or relate its religious allegory to Gnosticism or Zen. The Wachowskis, predictably, relish the reputation for cosmic wisdom that has been wished on to them. A viewer, ushered into their spectral presence during an online conference, once noted: 'Your movie has connections to Judaeo-Christian, Egyptian, Arthurian and Platonic myths, just to name those I've mentioned. How much of that was intentional?' The invisible Wachowskis replied from limbo: 'All of it.'

The brothers have cultivated their mystique with care, pretending to be absent, disinterested gods, creating a world for the rest of us to live in. Their biography states merely that they 'have been working together for 30 years' and then shrugs: 'Little else is known about them.' Glimpsed in a DVD featurette, they turn out to be scruffy slackers, more or less indistinguishable from each other because of their shared uniform of jeans, sneakers, sweatshirts and zip-up jackets; both wear baseball caps, though, to reassure you that you're not suffering from double vision, one of them will have the cap on back to front.

Positive identification is possible when you notice that Andy is bearded and chubby, while Larry wears specs and has a couple of earrings depending from his lobes. In their overlapping utterances, they babble abstrusely: Larry, for instance, remarks that when you take religion and maths 'to the infinity point, you wind up at the same place - these unanswerable mysteries really become about personal perception'. I especially love that 'really'. I suppose we get the magi we deserve, but can these be the inventors of a new heaven and earth?

Let me attempt my own decipherment of The Matrix, which is not quite as windily lofty or obscure as it might seem. Science fiction's futures are always modifications of the present. 1984 (from which the Wachowskis purloined Neo's Room 101) was Orwell's commentary on the regimented society of 1948. 'You believe it's 1999,' Morpheus says to Neo, 'when it's closer to 2199.' Actually, the reverse is the case. The Matrix is a parable of our own time, a period when, thanks to biotechnology, Homo sapiens may be evolving into a race of beings who are at once more and less than human.

Although Morpheus dismisses reality as 'electrical signals interpreted by the brain', the film is grounded in a real place. It was made on the streets and rooftops of Sydney, and anyone who knows the city will spot the towers of the financial district, the open-air food court of Australia Square, or the grimy alleys of Glebe. The Wachowskis mystified the location by superimposing street names from their own hometown, Chicago; the purpose was to suggest placelessness, that disoriented modern condition, inherent in a world where geographical distance and difference have imploded.

When the Wachowskis needed a warped and kinky setting for the scene in which Neo is recruited by Morpheus, they simply took over a Sydney S&M club and invited the members to come along in their fetishistic costumes. If you want to see the future, just look around you.

The predicament the film investigates - the showdown between organism and engineering, between a life based on carbon and one that derives, like the computer's intelligence, from silicon - catches the paradox of the way we live now. Take, for instance, the fashion accessories of the characters, so keenly imitated by fans. Dark glasses are compulsory in The Matrix. They block the sun, from which Plato's cave-dwellers recoil, but they also serve to occlude the eyes of the wearer. They prohibit engagement with the world beyond the lenses and frustrate any exchange of glances with another person; to put on shades is to solipsise yourself. Neo gazes at Morpheus, and sees only the dual reflection of his own face in those black, opaque windows.

The film merely mimics a contemporary habit: in a New York blizzard two weeks ago, I saw dozens of people - mutants? replicants? digitalised phantoms? - trudging through snowdrifts beneath a grey, woolly sky, all wearing sunglasses. Their eyes were turned back into their heads; our collective existence had become a private film screened in what Morpheus calls our 'primitive cerebrum'.

Telephones, which are lifelines for Neo and his companions, serve the same purpose. The hackers escape from the matrix by beaming themselves down the twisting, fibre-optic cables of a phone line; at the other end, they re-occupy the bodies they have temporarily quit. Once again, the fable dramatises the way we live now, conducting animated conversations with absent partners as we walk through the streets. And since the screens on mobile phones have learnt to transmit images, we can direct and perform in the films of our own lives, communicating across an aerial distance that never needs to be abridged by the contact of bodies.

If you want to do something as old-fashioned as having sex, that, too, can be arranged without the messy, infectious commingling of flesh. When Neo ogles a woman in a red dress, Morpheus explains that she, too, is nothing more than a neural projection. Still, acting as a 'digital pimp', another charcter offers to arrange a date. Why not talk yourself to a solitary climax on the phone, or have virtual intercourse on the internet? Plugs make contact more snugly than our concave and convex genitals ever could. Afterwards, the mouthpiece can be wiped clean, and the computer screen is tougher and more impenetrable than any condom.

As the scene in the S&M club intimates, the merger of bodies matters less than the approximation of fantasies. Death, presumably, is as phantasmal as sex, which is why in 1999 two teenagers at Columbine High School in Denver, addicted to the film and mimicking Neo's dark glasses, floor-length coat, and the armoury of weapons he straps to his body, opened fire in the library and canteen and massacred their friends before killing themselves. What harm could they be doing, if life was only a movie?

When not hacking, Neo sells illicit floppy disks to his clubbing friends. He programmes the clubbers with sensations: electronics are their designer drugs. He keeps the cash from these deals in a hollowed-out book, whose title is 'Simulacra and Simulation'. The volume opens at a chapter on nihilism, to remind us that the film itself is an exercise in annihilation. One of Neo's customers takes mescaline or, rather, connects his nervous system to a disk that delivers the appropriate hallucinations, and calls it 'the only way to fly'.

Flying comes easily to these people, who are yanked into the air by invisible wires. They skip across gulfs between skyscrapers, and kick-box while defying gravity. Such feats are made possible by the lightness of their being; because they live inside technological cocoons, nothing tethers them to the old, shared, solid earth.

This is a world of substitutes that must surely be more satisfactory than the authentic commodities they replace. A character called Cypher relishes a steak that he knows is just another illusion fed into his head by the matrix. Again, the film tells a contemporary truth. Meals, in a consumerist society, are about feelings, not nutrition, so we eat the sizzle, not the sirloin. Morpheus's crew subsist on snot-coloured gruel dished up in sardine cans. This foul porridge, someone tells Neo, contains 'a single cell protein combined with synthetic aminos, vitamins and minerals'; the formula is chemical.

Have you read the labels on the cans or packets at the supermarket recently? If the artificial flavouring is unpersuasive, your own imagination does the rest. One hacker believes that the slop resembles a breakfast cereal called Tasty Wheat. He then concedes that he has no idea what wheat tastes like: his suggestible taste buds are simply following the instructions of that capitalised adjective.

The agents hunting Morpheus call him a 'terrorist' or 'the most dangerous man alive', though his only crime is to have exposed the fragility of the fiction that houses us. When, two years after the film's release, more brutally fanatical political terrorists did the same, our guardians responded by telling us to go back to sleep, to curl up contentedly in our matrix of commercialised dreams. Bush, immediately after 9/11, eloquently rallied Americans to continue shopping, and during the security alert in New York in mid-February, when rumours circulated about cyanide attacks and dirty bombs, and fighter jets screeched on patrol above the city, mayor Bloomberg urged Manhattanites to go the movies.

The Matrix analyses our malady, though, of course, it dare not prescribe a cure, since that would mean an end to the sale of cinema tickets, DVDs and video games. The terrorism of Morpheus is merely conceptual. The Wachowskis, in ways that might now embarrass them, behaved like the genuine article when making the film. They took fiendish aesthetic delight in organising a helicopter crash, showing how its propellers buckle as it lunges sideways and shatters the glass wall of a skyscraper.

Fussing over the apocalyptic spectacle, Larry Wachowski said: 'We wanted the glass to explode in a kinda ever-expanding circle. It took three months of heavy-duty planning to figure out how to do that.' 9/11, after all, was an action movie whose pyrotechnics were not faked. It is creepily appropriate that the special effects for this year's two sequels, Matrix Reloaded and Matrix Revolutions, were filmed at a naval base in California, decommissioned during the presidency of Bush père. Here, a full-size freeway was built so that Cadillacs and 18-wheel trucks could burn up on it, bombarded by guided missiles. The lot resounded to playful blasts followed by storms of fractured glass, and the FX supervisor John Gaeta greeted visitors by saying: 'Welcome to the war zone.' Was America here rehearsing its own extinction?

Hyping The Matrix in 1999, the producer Joel Silver said: 'This is the first film of Y2K.' Back then, we were all nervous about New Year's Eve, though the worst scenario we could imagine was that our computers would lose their memories. Now that we are older, wiser and more scared, The Matrix looks truly prescient. Geneticists, cloning babies and tinkering with DNA, have begun to render humanity obsolete; Bush and his cronies hanker for a war so their machines can play lethal games.

No wonder that the two sequels are anticipated with such excitement. If there is a soporific, pacifying matrix, we all urgently need a connection to it.

· Matrix Reloaded is set for release in May; Matrix Revolutions will follow in November.

Magic bullets

· The two sequels, The Matrix Reloaded and The Matrix Revolutions, have cost more than $300 million.

· Trailers for the sequels, first posted on the internet last May, were downloaded 2 million times in the first 72 hours.

· The 2,500 different special effects in the new films cost £40 million.

· 'Bullet time,' the trademark special effects trick in The Matrix, in which the camera appears to spin 360 degrees around a central image, has since featured in Crouching Tiger, Hidden Dragon, and Charlie's Angels and been parodied in Shrek and Scary Movie.

· In June, the Wachowski brothers will release a DVD called The Animatrix , a companion collection of nine short films that help explain the mythology behind the trilogy.

· In the film, the Matrix is a 'megacity', 10 times the size of New York.

· R&B star Aaliyah, who had been cast in a supporting role, died in a plane crash last August. She was replaced by Nona Gaye (Ali), Marvin Gaye's daughter.